FDIC concerns spread to foreign covered bonds

Author: Danielle Myles | Published: 31 Jan 2012

The Federal Deposit Insurance
Corporation’s (FDIC) depositor protection concerns
over covered bonds have been picked up by regulators in other
parts of the world, according to panelists at the American Securitization
Forum’s 2012 conference (ASF2012) last
week.

Proponents of US covered bond legislation have
lobbied against the FDIC which says overcollateralisation risks
a disproportionate amount of assets being made unavailable to
depositors and creditors in a bank’s
insolvency.

The FDIC’s views have historically
been at odds with the global standard. But this may be
changing.

"I think the regulators in Europe are going to start
lowering the caps on covered bonds for the same reasons," said
panelist James Lockhart III of WL Ross & Co, referring to
the strengthening of...